Cayman tightens terrorism financing rules

“Terrorist financing” is now specifically defined as a criminal act in revised legislation due to be considered this fall by Cayman Islands lawmakers.

The Terrorism (Amendment) Bill, 2016, is expected to go to the Legislative Assembly in late September or early October for approval. It will bring the British Overseas Territory’s anti-terrorism laws “into conformity with the international standards recommended by the Financial Action Task Force for combatting terrorism and money laundering.”

The Caribbean FATF is expected to arrive in Cayman during mid-2017 for a review of the territory’s money laundering and terrorism financing safeguards, and will consider heretofore unexamined businesses during its inspection, including non-financial services entities like real estate and precious metals dealers.

Previously, Cayman’s anti-terror rules defined “property” held for the purposes of terrorists. Once the new legislation is adopted, “terrorist property” will be defined as property used in the financing of terrorist acts or for the support of terrorist organizations.

Anyone who knowingly provides or collects property with the intention or awareness that it will be used for terrorism commits a criminal offense under the revised legislation.

The proposed legislation also creates an offense of inciting terrorism for anyone who makes a contribution to a group, knowing that contribution “is likely to be used” for the furtherance of terrorist activities.

The bill also levies punishment for anyone, Cayman Islands resident or visitor, who travels from the islands to another jurisdiction to participate in or finance terrorism, or recruit for terrorist organizations.

Criminal offenses for terrorism can be committed under the revised law even if the act itself fails or does not occur and regardless of whether the property (finances or other items) used to support the terrorist acts are from legitimate or illegitimate sources.

The Cayman Islands governor is given powers under the new bill to directly apply to the U.N. Security Council for designation of a person involved in terrorist activities, which can lead to that person’s assets being frozen during the period of the order.

An act of terrorism is defined in the new legislation as something which can cause loss of life or serious injury, damage to property or the disruption of public safety services that is intended to “compel a government or international organization” to take a specific action or to “intimidate the public or a section of the public for the purpose of advancing a political, religious, radical or ideological cause.”

In addition to the new anti-terrorism amendments, the Cayman Islands government is advertising for the position of “sanctions coordinator,” who will ensure the implementation of financial sanctions for terrorism financiers or money launderers within the territory.

The duties assigned to the post include analysis of “proceeds of crime” from money laundering or terrorism activities and to identify specific threats of those activities that exist.

The post, in the government Portfolio of Legal Affairs, pays between $72,000 and $98,000 per year.

FATF review

Financial Services Minister Wayne Panton said in May that Cayman is quite familiar with periodic reviews done by the Caribbean Financial Action Task Force, but the one due to occur in the second half of 2017 will be different than those the territory has experienced in the past.

“These new [FATF] assessments are no longer just about technical requirements,” Mr. Panton said. “There will be an assessment based on effectiveness [of the current regulatory system]. Our view is we need to have that in place ahead of time.

Financial Services Ministry chief officer Dax Basdeo said the underlying objective of the upcoming FATF review is to ensure businesses that tend to handle large sums of money can verify, to a reasonable extent, that no cash laundering or terrorism support activities are going on.

This largely involves “know your client” exercises and other due diligence measures that would be carried out by a bank or financial institution in the regular course of doing business, he said.

The phrase ‘a day late and a dollar short’ comes to mind here. The use of Cayman Islands accounts to handle terrorist funds was clearly established about 14 years ago just after 9/11 so why has it taken so long for the LA to introduce what is in reality a panic move?

One problem I can also see is how you define terrorism. A number of security services (I’ll give the CIA, MI6 and Mossad as examples) combat terrorist groups by fairly aggressive means and also channel funds for this work through offshore accounts. I have no issue with that but where will CIG draw the line?